New presidents taking the helm at the world’s most premier development institution, the World Bank, have always tried to reform the large organization. Consider the past three.
On his first day on the job in June, 2023, Ajay Banga, the bank’s 14th and current president, wrote to the bank’s 16,000 staff, “Making good on our ambition will require us to evolve to maximize resources and write a new playbook, to think creatively, take informed risks and forge new partnerships with civil society and multilateral institutions.” Banga is also expanding the scope of the World Bank’s mission to include combating the effects of climate change. The bank’s new mission is “to end extreme poverty and boost shared prosperity on a livable planet.” The old mission, which continues to prove difficult, was simply to end extreme poverty and boost shared prosperity.
David Malpass, the bank’s 13th president, focused his efforts on reforming the bank so it worked more with the private sector. Just before he left the bank last year, he said of his efforts “Our new approach provides a blueprint to strengthen private sectors and increase the amount of private capital flowing into development to help millions of people around the globe.”
And the 12th president, Dr. Jim Yong Kim who tried to reform the bank got “strong resistance from a rank and file protective of its parking subsidies, business-class travel, and generous meal allowances,” according to this Bloomberg article. Kim wanted to focus the bank’s efforts on eradicating poverty and boosting incomes for the world’s poorest 40% by 2030. Even as the bank, by its own admission, fought for “relevancy” as many of its customers didn’t seem to need it anymore because of a multitude of financing options, the bank’s rank and file challenged reforms.
Reform has always proven challenging to execute and there is little to no indication that Banga’s tenure will prove any different. What can Ajay Banga learn from past reform efforts that have proved challenging?
First, reform, almost regardless of the circumstance, is difficult. Just ask anyone who has ever made New Year’s resolutions and how quickly they are broken. If it is so difficult for a person to reform themselves when they want to, how much more difficult will it be to reform an entire organization? In fact, research from Matt Andrews at Harvard University, suggests that approximately 70% of institutional reform projects fail. Also, according to most studies between 70% and 90% of most mergers and acquisitions fail. For two firms to merge successfully, reform, in one form or another, is necessary.
Understanding the goal one sets out to accomplish is incredibly important because it ensures proper resource allocation for the task. That brings me to my next point, which is picking the right people for the reform efforts.
One of the reasons reform efforts struggle is because, as President Kim learned, many of the people who must undergo reform often fight it. As a result, Banga should employ the “schools of experience” theory to select leaders who can reform the World Bank.
The schools of experience theory treats business units at different organizations as “schools” and the problems that managers confront within these units constitute the “curriculum.” As such, the skills that managers within these units can be expected to have and lack, depend heavily on which “courses” they have taken.
For example, a new founder of a company who has built it from a scrappy startup with four employees to a successful process-driven organization with 1,500 employees has acquired the experience of managing scarce resources, developing new processes for staff (which is different from implementing existing ones), and building relationships with partners, suppliers, and customers. As a result, the startup founder can be trusted with creating new entities within (or outside of) existing organizations. In contrast, the founder might struggle to lead a large team with existing processes in place.
In effect, by studying the “schools of experience” that managers, directors, and staff at the World Bank have gone through, and understanding what challenges they have experienced or overcome, Banga can assess how successful his reform efforts would be today.
Banga’s vision for reforming the bank hinges on ensuring that the tasks required for reform align with the skills of the bank’s staff. Success will largely depend on whether these tasks are familiar to key staff members, or if they are willing to take on new responsibilities. In the latter case, it will be necessary to factor in additional time as the staff develops the skills they need to successfully execute his reform agenda.
For example, in addition to expanding the scope of the World Bank’s mission, Banga also hopes to increase the bank’s International Development Association (IDA) funding to low-income countries to the “largest of all time.” To do that, Banga must either have members of his team who have, in the past, successfully negotiated increases in funding to their organizations or have staff who have been able to craft convincing narratives that have fundamentally changed the course of a particular initiative. Either way, the schools of experience theory suggests that for Banga to succeed, he should hire the people who have had experience with the type of reforms he hopes to accomplish for the World Bank.
